Nedbank plans to dump KPMG and use EY as its auditor
This is yet another big blow to the auditing firm which has lost client after client after the discredited Sars ‘rogue unit’ report and VBS scandal
Nedbank has announced it proposes to replace KPMG with EY as its auditor at its next annual general meeting, heaping even more pressure on the embattled firm that has lost a number of high-profile clients in recent months.
Nedbank said in a statement on Monday that it proposed terminating KPMG as an auditor at the meeting, which is scheduled for May 2019. The banking group said that, following “a comprehensive tender process” EY with Farouk Mohideen as lead audit partner, has been nominated as the new joint external auditors.
This means that following the completion of the audit for financial year ending December 2018, KPMG will be replaced by EY.
While the bank made reference to mandatory audit firm rotation being introduced by the Independent Regulatory Board for Auditors (IRBA) which becomes effective in 2023, it seems in this case, only KPMG’s services are being terminated. Deloitte will remain the external auditor with EY for the foreseeable future.
Executive chair of KPMG SA Prof Wiseman Nkuhlu said: “It is always disappointing to lose a client, but we remain very proud of the work that we have performed for Nedbank over many years, and of the diligence and professionalism of the team who served them.
“KPMG itself is a very different business from a year ago, as we have implemented far-reaching changes to all aspects of the firm including governance and leadership, the client roster, quality as well as culture and ethics. I am confident we are taking the right steps and that this is being recognised by clients,” Nkuhlu said.
“Our readmission earlier this month to membership of Business Leadership SA was a welcome recognition of the changes we are making and has bolstered our determination to continue taking all measures to restore trust in the firm.”
This is another devastating loss for KPMG, who bled clients in the wake of its largely discredited SA Revenue Service (Sars) report on the so-called ‘‘rogue unit’’, that led to a purge of a number of senior officials at the tax body under former president Jacob Zuma’s administration.
The auditor made headlines again when it was revealed that previous KPMG partner Sipho Malaba had signed off the audit of VBS Mutual Bank for the 2017 financial year.
The financial statements were later withdrawn by the banks'curator, Anoosh Rooplal, and a report published by advocate Terry Motau entitled, “VBS — The Great Bank Heist”, implicated Malaba in receiving R33.9m in “gratuitous payments.”
Banks are substantial clients of auditors. The termination of KPMG’s services by Nedbank follows that of Absa, which earlier in 2018 terminated the firm. This was soon followed by the decision of the auditor-general, who similarly terminated the services of the firm in May.
Other companies that have left KPMG already include Dimension Data, The Foschini Group, Sasfin, Saica, Finbond, Sibanye-Stillwater, Redefine and Gold Fields.
The firm has made wholesale changes to its leadership and is in the process of appointing a new CEO to succeed Nhlamulo Dlomu, who is transitioning to a global role with the firm. Dlomu took the reins after previous CEO, Trevor Hoole, resigned in 2017.
These changes might have prompted some loyal clients to stick with the company, including Investec, Standard Bank and Old Mutual.